Rialto talks tax hike, cutbacks to 'prevent bankruptcy'

Trucks fill up at the pumps at the Kindder & Morgan pipeline on Oct. 18 in Rialto. Measure V is a Rialto ballot measure that would increase the sales tax on business licenses for fuel producers in the city. Officials say the increase could bring $5 million annually to the cash-strapped city. (LaFonzo Carter/ Staff Photographer)

RIALTO - In the aftermath of a failed ballot measure that would have brought millions to the city, officials on Tuesday discussed bringing to voters an extension of the utility-users tax to help stave off a financial collapse.

A loss of the tax would mean "major cutbacks and additional layoffs to prevent bankruptcy," according to a staff report to the City Council approved by City Administrator Mike Story.

The tax accounts for around $11 million annually and averages more than 20 percent of General Fund revenue.

According to the staff report, the loss of the tax, which is set to sunset in June, "can be described as catastrophic when added to the existing deficit spending situation.

A petroleum pipeline sign warning residents to call in, in case of emergency, on Slover Avenue near Riverside Drive on Oct. 18 in Rialto. Measure V is a Rialto ballot measure that would increase the sales tax on business licenses for fuel producers in the city. Officials say the increase could bring $5 million annually to the cash-strapped city. (LaFonzo Carter/ Staff Photographer)

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Combined with the $11 million structural deficit, the tax loss would create a General Fund shortfall of more than $21 million.

Public safety would likely be impacted, and if the General Fund takes the hit, so too would the city's credit rating and its ability to fund projects.

The tax is set at 8 percent on users of various utilities in the city. It was first adopted in 2003 and intended to be for five years.

But voters approved its renewal in 2007 as the economy turned sour and the city bled property tax revenue and other income.

Indeed, property taxes here remain at insufficient levels, and according to the staff report "there are no other sources of replacement revenue."

The city has been in deficit-spending mode since 2008 and has used reserve funds to stay afloat.

But the reserve funds have reached "a critical level and if used further, would severely hamper the city's ability to continue operations."

But they say those measures have only reduced the deficit spending but have not eliminated it.

If the utility-users tax sunsets, management says the city faces more cuts in public safety departments and the elimination of basic operations including recreation, code enforcement and street and parks maintenance.

George Harris, director of administrative and community services, told the council that all of the city's fiscal reserves "will be depleted" by fiscal 2013-14 if the tax is not reinstated.

The discussion came on the heels of another proposed tax that Rialto voters shot down on election night.

Measure V, a proposed tax hike on petroleum companies operating in the city, fell as more than 52 percent of voters said no to the proposal.

Officials pushed hard for the measure as it could've meant as much as $5 million annually to the city.

In fact, the council voted 4-1 on Sept. 11 to pay Bustamante and Associates $15,000 to $143,000 on "community outreach services" that included five mailers, which were also posted on the city's website.

Measure V was touted as a way to pay for more police officers and firefighters.

But it failed, and officials will likely ask utility users if they can spare a dime again.

Councilwoman Deborah Robertson, who just won election to the Mayor's Office, asked Harris "is 8 percent really enough" of a utility-users tax.

Harris said that would be fleshed out during a Nov. 20 public workshop when various rates will be discussed.

The utility-users tax is as high as 12 percent in parts of the state, officials said. They said the public needs to be clear about what's at stake without an extension of the tax.